The average consumer’s debt load climbed to a record high $25,960 at the end of 2011, although annual data from a credit bureau report released today suggests that the Canadian love affair with debt is waning.
Consumer debt, which excludes mortgages, edged 1.4 per cent higher in the fourth quarter of 2011 from the previous quarter, according to a report released early on Thursday by TransUnion.
The increase comes on the heels of three quarters of flat-to-negative growth but is in line with a year-end spike that generally comes during the holiday shopping season, said Thomas Higgins, TransUnion’s vice-president of analytics and decision services.
He believes the “continued deceleration in the annual growth of overall debt levels” is the more interesting - and hopefully promising - trend.
The report showed that annual growth in consumer debt fell below 1 per cent for the first time since TransUnion began tracking credit trends at the start of 2004. The current trend of slowing consumer debt growth began in late 2009.
That basically means that while debt levels are still growing, the pace of growth has slowed drastically.
“The first and second quarters of 2012 should be quite revealing as we may see the first year-over-year decline in total debt since at least 2004,” Mr. Higgins said.
He attributed the increased caution among consumers to the uncertain economic outlook, debt problems in Greece, as well as the warnings issued by Canadian policy makers.
“All of this has really helped to get people focused on debt and trying to get it down before interest rates start to rise,” he said.
Debt levels among Canadian households have soared to new highs in recent years, with people turning to credit to finance purchases of cars and home renovations.
Central bankers have been warning Canadians about excessive debt loads and their ability to repay the money they owe once interest rates rise from their current lows.
Lines of credit are by far the biggest source of non-mortgage debt among Canadians, accounting for 42 per cent of the overall debt pie. This type of debt, which is cheaper than credit card debt, continues to grow although at a slower pace, Mr. Higgins noted.
Other key credit statistics listed in the TransUnion report include:
- Canadian average credit-card borrower debt declined 1.49 per cent on an annual basis but rose 0.61 per cent quarter over quarter
- Canadian lines of credit (LOC) borrower debt increased 1.1 per cent year-over-year and 0.64 per cent from the previous quarter
- Canadian installment-loan borrower debt fell 5.3 per cent year over year and 2.58 per cent quarter over quarter
- Canadian auto borrower debt jumped 9.7 per cent year over year and 2.8 per cent from the previous quarter
The data released Thursday by TransUnion also shows that while debt levels are high, most Canadians are still able to meet their debt repayment obligations.
Delinquency levels remain low across all major product categories, the report said, with delinquencies on lines of credit sitting at 0.21 per cent and for credit cards at 0.31 per cent.
The TransUnion analysis is based on anonymous credit files of all credit-active Canadians.